Every investor wants to see their money grow – it’s a given. So, if growth is already the assumption when it comes to saving and investing, what describes the goal you have for your money?
As you build wealth, it is important to know why you’re building the wealth, not just learning about what investment to add to your portfolio. This may sound like common sense, but in reality, it is not.
Discussing investment options without first having a strategic plan in place is like asking your doctor for a prescription without a diagnosis. The conversations people think they should be having with financial advisors revolve around investment options, past performance, fees, etc. These conversations have a time and a place, but this information has nothing to do with solving a problem – like retirement income planning.
Asking all the wrong questions
Many people are often frustrated after having met with advisors and hearing about portfolio management styles, approaches to diversification, benchmarks, and performance. The canned presentations never address their underlying concern of being confident about goals for the future.
People who have accumulated wealth know and understand how to grow money, but when it comes time to begin using the money or protecting it, it can lead to confusion and uneasiness, which has them resorting back to what they know. Your advisor needs to dig deeper, and you need to know the right questions to ask.
Financial planning is not just about investments; it is about mapping out how to use money now and in the future. A strategic plan is paramount – my clients know this. They know it’s not just about investments, it’s ensuring loved ones are taken care of if they should pass away. Too many advisors confuse this, and in turn it confuses the public into thinking that they should always be shopping for the next best investment.
People, in general, don’t understand the disconnect between their needs and investments. Here are a few things you can do to increase your probability of success and assist with getting a plan in place to meet your objectives:
- Ask yourself what the reason is for growing your money. Remember, there are specific things you need the money to do for you, focus on that. How will you use the money?
- Pay attention during the next conversation with an advisor, noting how much of the conversation is about your life goals, concerns for the future, tax situation and other non-investment related topics versus how much of it centers around investment products. Use the 80/20 rule, where 80% of the time needs to be spent on what you’re trying to accomplish, and the strategy to make it happen and the other 20% is about what products to use.
- Resist the temptation of asking about investments and force the conversation to be centered around your goals. Explain your goals for the money instead of projecting your expectation of return and risk tolerance – and if the advisor seems focused on their product investment strategy, find another advisor.
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